Is this the beginning of the end for the personal computer? The future seems to be uncertain. According to research conducted by International Data Corporation (IDC), PC sales figures were almost twice as bad as the research firm’s original expected drop of 7.7%. The 13.9% worldwide decrease in PC shipments in the first quarter of 2013 is the worst since 1994 when IDC began tabulating this data.
The worst year-on-year shipment declines by region were in the U.S. and Asia, both with a 12.7% drop. For the U.S., this most recent drop marks the tenth consecutive quarter of year-on-year declines, excluding a minuscule, less than 2% rise in the third quarter of 2011.
However, the double-digit decline is a first for Asia, and low public sector spending in China appears to be a major reason for the decline. The top three PC manufacturers felt the pain of the industry’s lack of innovation in attracting consumers, and its inability to effectively compete with tablets and smartphones.
Microsoft Corporation (NASDAQ:MSFT) and Windows 8 impact
So far, Microsoft Corporation (NASDAQ:MSFT)’s Windows 8 has not had a positive impact on the industry. According to IDC, two major issues with the software that are impacting PC sales include the higher costs attributed to PCs with touch capabilities and the changes to the once familiar Windows interface.
The company’s third-quarter financial results showed an increase of 8% in revenue to $18.8 billion and diluted EPS of $0.65. Analysts polled by Thomson Reuters estimated that revenue would reach $20.5 billion, along with an EPS of $0.68.
CEO Steve Ballmer stated in the company’s press release, “While there is still work to do, we are optimistic that the bets we’ve made on Windows devices position us well for the long-term.” Departing CFO Peter Klein stated the company delivered solid results, even as it navigates the evolving device market.
Losses at HP
Hewlett-Packard Company (NYSE:HPQ) had a 23.7% year-on-year decline in worldwide shipments in 1Q13. While current restructuring may shoulder part of the blame, a muted consumer response to Windows 8 may have also played a role in HP’s lackluster performance. Despite the drop in shipments, Hewlett-Packard Company (NYSE:HPQ) continues to hold on to its top spot in the U.S. as a PC supplier.
Hewlett-Packard Company (NYSE:HPQ)’s first-quarter results showed a drop in non-GAAP diluted EPS to $0.82, down 11% from the previous year. Net revenue was $28.4 billion, a decrease of 6% compared to last year. Operating cash grew 115% from last year to $2.6 billion; $511 million was returned to stockholders through dividend payments or share repurchases. Meg Whitman, Hewlett-Packard Company (NYSE:HPQ)’s CEO, commented the following regarding the cash paid to shareholders:
“…we improved our operating company net debt position for the fourth successive quarter by more than $1 billion to $4.7 billion. We’ll continue to take this approach and focus on rebuilding our balance sheet.”
Promising results for Lenovo
Right behind Hewlett-Packard Company (NYSE:HPQ) is Lenovo, the only PC maker with some positive news. It outperformed in the U.S. market with double-digit year-on-year growth. Dismal numbers in the Asia/Pacific market ultimately took back the gains, resulting in a flat revenue performance. According to InfoWorld, part of Lenovo’s success can be attributed to the fact that the company, unlike its rival Hewlett-Packard Company (NYSE:HPQ), supports both Windows 7 and 8 platforms.
Lenovo’s third-quarter results for the current fiscal year show its PC sales growing faster than the rest of the market. The company controls 15.9% of the PC market, just behind HP’s 17%. Earnings grew 33% over the prior year to $205 million. The company is working on various acquisitions to expand market share in countries such as Japan and Brazil.